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Quidel (NASDAQ:QDEL)
Q1 2019 Earnings Call
May. 08, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Quidel Corporation first-quarter 2019 earnings conference call. [Operator instructions] I would now like to turn the call over to Mr. Ruben Argueta, Quidel's director of investor relations.

Please go ahead.

Ruben Argueta -- Director of Investor Relations

Thank you, operator. Good afternoon, everyone, and thank you for joining today's call. With me today is our president and chief executive officer, Doug Bryant; and Randy Steward, our chief financial officer. Our first-quarter 2019 earnings release is now available on ir.quidel.com, our Investor Relations website.

We will also post our prepared remarks on the Presentations tab of our IR website following the conclusion of this call on May 8 for a period of 24 hours. Please note that this conference call will include forward-looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ significantly from these stated expectations. For a discussion of risk factors, please review Quidel's annual report on Form 10-K, registration statements and subsequent quarterly reports on Form 10-Q as filed with the SEC.

Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, May 8, 2019. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. Today, Quidel released financial results for the three months ended March 31, 2019. If you have not received our news release or if you would like to be added to the company's distribution list, please contact me at (858) 646-8023.

Following Doug's comments, Randy will briefly discuss our financial results, then we'll open the call to your questions. I'll now hand the call over to Doug for his comments.

Doug Bryant -- President and Chief Executive Officer

Thank you, Ruben, and good afternoon, everyone. The three topics that I'd like to cover with you today are: first, our financial performance both for the full year and for the quarter; second, the status of products in development; and finally, the status of the Danaher litigation. And of course, I'm happy to answer your questions as well following Randy's remarks. About our financial performance, I'll begin by saying that we had another good quarter, consistent with our internal expectations and importantly, are in very good shape to achieve the goals for the full year that we've communicated previously.

There's a gap with analyst consensus for Q1 that we will address today. But again, our financial performance for the period was fine. Here are a few details on our expectations for the full year and on the recent quarter. For the year, there's good news.

Our goal for the year upon which our management team is accountable to our Board of Directors and its incentive is based is unchanged. With Q1's performance, we expect to meet or exceed our 2019 annual operating plan. Flu was better than we expected in the quarter, and China cardiovascular revenue strength offset cardiovascular softness in the United States, most of which appears to be due to timing. Last year, during the Analyst Day meeting in April, we expected revenues of up to $520 million as our target.

Later in the year, we raised it to over $520 million. This year, in early May with Q1 behind us, we believe that a target of $535 million on a constant-currency basis seems appropriate. Absent flu and rapid strep, this would represent 8% growth year over year. For Q1, our total revenue performance at $150 million on a constant-currency basis was actually spot on our annual operating plan.

There was $2.2 million in unfavorable FX due almost entirely to the cardiovascular business, which brought our net revenue to $148 million. Now that we are off the TSA agreements in Europe and China, we have implemented a hedging policy, and Randy can walk you through the details on what we're doing moving forward during the Q&A. In Q1, the two larger drivers to our financial performance were the respiratory disease products and cardiovascular as expected. For influenza, I think it's safe to say that most of us over called the year-over-year downside.

Our influenza revenue for the quarter was $47.2 million, which makes Q1 2019 our second highest quarter ever for flu, behind last year's monster Q1 and better than we had planned by $5 million. Getting quarterly flu right has always been a challenge and now because of the magnitude of the cardiovascular franchise, forecasting this business well is equally important. We advise our shareholders to expect $276 million in revenue for the entire year and an overall growth rate for the year of just under 4%, driven by introductions in the back half of the year of the new toxicology panel globally and high-sensitivity troponin in Europe. We said further that they should expect to see from $64 million to $69 million in the early quarters given variability in distributor orders in any given quarter.

In Q1 2018, last year's first quarter, we did $68 million, which included a $1.5 million swing between the two quarters. In other words, we did effectively $66.5 million. We advise shareholders on several occasions that the ongoing cardiovascular business, all things normalized, felt more like $65 million per quarter. For Q1 2019, cardiovascular revenues were $68 million in constant currency or $65.9 million with $2.1 million in unfavorable FX.

We did what we said we would do in any given quarter before the new products are launched and are still comfortable with our overall full-year revenue forecast, assuming a normal Q4 respiratory season start. Non-GAAP EPS for the quarter was $0.91 per share. On a constant-currency basis, it was $0.94, which was precisely on our annual operating plan. Two unplanned factors had a negative impact on EPS.

First, gross margin in the quarter on legacy rapid diagnostic products was depressed due to factory absorption at our McKellar facility where those products are still made as we burned through influenza inventory that we were carrying over from Q4. In addition, cardiovascular price was lower due to mix as sales in China at lower prices offset said sales in the United States at higher prices. And second, we had unplanned short-term spending increases in a couple of areas: Savanna expenses with third parties involved in cartridge and instrument manufacturing and litigation expenses. If not for the expense increase, EPS would have been another 3% -- or excuse me, another $0.03 higher.

Regarding product development, I will be brief as you can ask for clarification if you like during the Q&A. Our R&D teams had another very productive quarter and the news here on this topic is again very positive. First, the Strep 98 is in clinical trials in the U.S. and the data thus far are encouraging.

Second, the six Sofia GI products expected in the next 12 to 18 months are progressing nicely, and the Sofia C. diff toxin/GDH product performance in beta trials was outstanding. Third, the technology that will enable multiplexing on Sofia test cartridges has proven to be robust and we should be able to manufacture in large volumes. Therefore, Sofia Tier 2 Lyme, which will replace western blot as a confirmatory assay, and Sofia RVP look increasingly possible.

And finally, assay development for six Savanna mini-panel multiplexed cartridges is on schedule, and we are at last getting to cartridge design freeze advance of instrument system integration and a firmer time line. Regarding the Danaher/Beckman litigation matter, I will also be brief but will not be taking questions today. Most recently, the Court of Appeal issued an order agreeing to hear our writ petition on the merits of the case and has stayed the trial court's December 7 order. We are pleased that the Court of Appeal has agreed to hear the merits of our challenge of the trial court's decision.

The timing for hearing oral arguments is likely to be this summer or early fall, with the decision from the court to follow no more than 90 days from when the court hears the matter. Our position remains unchanged. We view Beckman's claims as meritless and in opposition to Beckman's long-standing strategy of honoring the supply agreement with its previous partners Alere and Biosite over the last 15 years. We remain confident in our position and confident in the outcome of the matter on appeal and ultimately at trial as the matter progresses.

In summary, we had another solid quarter and we achieve what we said that we would. I must add that I'm pleased with our overall forecasting accuracy. But in fairness, having more leverage than just influenza helps significantly, and it should get increasingly easier as we continue to grow both organically and through acquisition. I've said this so many times over the last year that it's beginning to feel redundant, but our focus as an organization is on leveraging several assets: our significant Sofia installed base and brand; our cardiovascular and toxicology franchises; our R&D skill, talent, expertise and know-how; our manufacturing and automation competence; our global infrastructure and footprint and our customer in distributor relationships and leveraging those to the greatest extent possible.

Randy?

Randy Steward -- Chief Financial Officer

Thanks, Doug. Good afternoon, everyone. As we reported earlier today, total revenues for the first quarter of 2019 were $148 million as compared to $169.1 million in the first quarter of 2018, a decrease of 13%. On a constant-currency basis, revenue would have been $150.2 million in the quarter.

The negative currency impact of $2.2 million was mostly driven by weakness in the euro and the Chinese yuan. From a product perspective, $2.1 million of the $2.2 million impacted our the cardiac business. As expected, the year-over-year decline in total revenue was due to an 18% decline from the legacy business, due in large part of our record flu season that we experienced in the first quarter of 2018. Beyond flu, we also saw revenue declines from other seasonal tests that trend with a stronger or weaker respiratory season, such as Strep A and RSV.

Moving on to the major product categories. Rapid immunoassay revenues declined 23% or $18.2 million from the first quarter of 2018, primarily due to a $17.4 million difference in flu revenue from Q1 of 2018. Total flu revenue was $47.2 million and as Doug mentioned, above our internal estimates. Sofia revenue was $42.9 million as compared to $58.1 million in Q1 of the prior year, and QuickVue revenue was $18.4 million as compared to $21.4 million in Q1 of 2018.

Consistent with a weaker respiratory season that in 2018, within this immunoassay business, Strep A declined 10% and RSV declined 2%. Rapid immunoassay unit inventory at distribution is down 25% from the same quarter last year and down 32% sequentially. Specific to flu, the inventories at distribution are down 36% versus last year's first quarter. In the cardiac immunoassay category, revenue totaled $65.9 million in the quarter versus $68.4 million in the same period last year.

As we mentioned previously, FX had a negative impact of $2.1 million on cardiac revenue, and on a constant-currency basis, revenue was $68 million, just slightly below the reported number last year. Triage revenue was $35.6 million, which declined 10% from first quarter of 2018. On a constant-currency basis, triage revenue was down 6% versus last year. Regionally, triage saw revenue declines in North America, Europe, Middle East, Africa and Latin America and was partially offset by 6% growth in China.

On the Beckman BNP side, revenue increased 4% over the first quarter of 2018 to $30.3 million. On a constant-currency basis, BNP was up 7%. Regionally, China was the biggest contributor to revenue growth, and this was partially offset by declines in both North America and Europe, Middle East, Africa. Overall, we believe the 4% growth from cardiac is achievable and is partly contingent upon revenue contribution from newly launched triageTrue Troponin in Europe and the anticipated launch of our next-generation toxicology assay.

Revenue in the specialized diagnostic solutions category decreased 7% in the first quarter to $13.9 million, primarily due to a decrease in our respiratory and general virology cell culture products. Our molecular diagnostic solutions category increased 12% in the quarter to $5.7 million due to 24% growth from Solana assay revenue. Gross profit in the first quarter decreased $15.3 million, primarily the result of lower sales of rapid immunoassays in the quarter. Gross margin in the first quarter was approximately 61%.

This compares to 63% in the first quarter of 2018. Lower factory absorption relating to lower production impact at the legacy business while currency and geographic mix had a negative impact on the cardiac gross profit and margin. For the full year, we are estimating gross margin improvement over full-year 2018. R&D expense increased by $1.3 million in the first quarter as compared to the same period last year.

This increase is due to the incremental expense associated with the Savanna molecular diagnostic platform and Sofia gastrointestinal assays. This was partially offset by decreased spend in the triage business. We believe that our R&D expense is tracking to our expectations and estimate that for the full year, the R&D spend will be in the range of $52 million to $55 million. Sales and marketing expense was $29.6 million in the quarter, an increase of $1 million as compared to first quarter last year.

This increase was largely due to higher word-of-mouth marketing and product promotional costs versus the prior year. For the full year in 2019, we continue to expect sales and marketing expenses to be in the range of 50 to 100 basis points lower than last year as a percent of revenue. G&A expense increased by $2.9 million in the quarter primarily due to increased infrastructure investments to support our global business and increased professional fees. Acquisition and integration costs in the first quarter were $2.8 million as we completed the integration for China and Italy.

Interest expense for the quarter was $4.6 million and includes $1 million relating to the convertible senior notes, $0.5 million relating to the senior credit facility and $2.3 million relating to the preferred and contingent consideration associated with the purchase of the cardiac business. The $3.3 million decrease in interest expense over last year was due to the reduction in debt of approximately $196 million over the last 12 months, and this includes the deferred and contingent consideration. In the quarter, we recorded $1.7 million in income tax expense. The low effective tax rate for the quarter is due to discrete tax benefits for excess stock-based compensation expense.

We believe our effective tax rate for 2019 should be in the range of 19% to 21% of pre-tax income before consideration for discrete tax items. The impact of the 2017 Tax Cuts and Jobs Act's regulations are yet to be finalized and they will impact where we fall in this range. We continue to strengthen our balance sheet. In the quarter, we generated $28 million in positive cash flow after spending $5 million on capital expenditures, and we paid off another $20 million on our revolving senior credit facility.

In the quarter, we had depreciation of $4.7 million and amortization of $7 million. As of March 31, the company had $56.9 million in cash on the balance sheet, $58.5 million in principal amount outstanding relating to the convertible notes and $33.2 million outstanding on the revolving credit loan. Additionally, in April, we made our second $48 million payment to Abbott and the outstanding principal balance on deferred and contingent consideration for the acquired cardiac assets is now approximately $184 million. And with that, we conclude our formal comments for today.

Operator, we are now ready to open the call for questions.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from the line of Jack Meehan with Barclays.

Jack Meehan -- Barclays -- Analyst

Doug, could you maybe help us with the pacing of cardiac immunoassay growth throughout the year? And what was driving some of the weakness that you're seeing in the U.S.? Is there any change in the competitive environment? Or just describe a little more of the timing issues you talked about.

Doug Bryant -- President and Chief Executive Officer

Specifically in the U.S., there are a handful of customers, maybe 70 or so, that we expect to reorder that didn't. So that was the principal cost of most, and that would be for the BNP assay run on Beckman's analyzer, so larger customers. We expect them to reorder so therefore, that's why I described it as timing. That was offset, of course, by pretty significant uptick in sales in China.

And so overall, I think we actually came in pretty close to what we thought we would do for the business in Q1, and we're expecting similar performance in Q2. And as we said before, we expect to see launch of toxicology products in Q3. We've already launched the high-sensitivity troponin in Europe and are just now shipping product there. So back half of the year is when we expected to see an uptick update and hence, the bottoms-up forecast that arrived at a number of $276 million for the full year.

Jack Meehan -- Barclays -- Analyst

OK. Do you still think the second-quarter number is a touch below $70 million? Or where should we be penciling it in?

Doug Bryant -- President and Chief Executive Officer

Well, again, I'll say, I don't know how many times now, we're pretty comfortable that the quarters feel like $65 million. Therefore, we gave a range of $64 million to $69 million before. I would be shocked if it doesn't fall in there somewhere. And the reason for that size of the range is that we've got a lot of distributor ins and outs, and it's really hard to figure out exactly when people are going to order.

So makes it a little bit more difficult to forecast, of course. But the underlying fundamentals of the business are pretty much unchanged.

Jack Meehan -- Barclays -- Analyst

OK. That's fair. And then on the molecular side, maybe just how did that come in relative to expectations? Can you talk about the marketing behind Solana now? And do you think you can still grow that over 20% for the year?

Doug Bryant -- President and Chief Executive Officer

We actually had a pretty good quarter and we exceeded actually our own internal plan. I do think there's a dynamic in some of the systems where there is an advantage that Solana has on the front end of the BioFire. And we've seen a number of closes so far that are driven by a couple of factors, one of which is just cost. So we're finally seeing that the cost advantage that Solana has to offer is becoming more widely known.

And so your question, does the 20% growth still feel good? And I would say, yes. One quarter in is one quarter in. And then of course, we don't manage the business quarter by quarter. We try to look at it on an annualized basis.

I would say 20% for the year looks good.

Jack Meehan -- Barclays -- Analyst

OK. And then the last one, I think I heard firmer time line for Savanna. So I would love any additional color you can offer around the cartridge design and just getting into the trials.

Doug Bryant -- President and Chief Executive Officer

We certainly see all that being locked down by this quarter. And the third-party folks that are involved with us in not only cartridge manufacturing but also instrument manufacturers are -- I'm sorry, instrument manufacturing are engaged. And we're still comfortable that at the end of the day that we'll have FDA clearance on the instrument by the end of 2020. That's still the goal.

I think it's still achievable. And as I've said before, that doesn't mean we're launching at that time because I'm emphatic that we're not going to launch until we have an offering that's meaningful for the customer that's compelling. And so we think that only occurs if we have four or five different cartridge products that we can offer at the same time. But in terms of FDA clearance by the end of 2020, we still think that's possible, but I'm laughing a little bit at myself because when we have a significant accomplishment in R&D, the guys always have the cake.

And we've told them FDA clearance of Savanna at the end of 2020 doesn't give them the cake. So they get the cake when we get the other four or five assays out.

Operator

Your next question comes from the line of Bill Quirk with Piper Jaffray.

Bill Quirk -- Piper Jaffray -- Analyst

So first question. Just with the TSA agreements expiring, anything meaningful left on the integration or anything you'd like to call out?

Doug Bryant -- President and Chief Executive Officer

Yes. Go ahead, Randy.

Randy Steward -- Chief Financial Officer

Yes. Really, the only meaningful thing left is we have India and Brazil and Japan are the only countries left, which are less about 3% of our revenue. From order to cash, it's pretty well complete. The only thing we have left is to get North America distribution into our distribution system and the effective date on that is July 1.

And then we will basically pretty much have completion of all the TSA agreements. So we're tracking well internally and we're really looking forward to Q3 where really own 100% of this business.

Bill Quirk -- Piper Jaffray -- Analyst

Perfect. And then just on the -- I'm sorry. Go ahead, Doug.

Doug Bryant -- President and Chief Executive Officer

No. I was just going to add that we're not stopping though. We have a business transformation group now headed by a senior vice president, and we expect to continue with the process improvement projects and manufacturing cost synergies. We believe there's quite a bit more still to harvest, but yes, in terms of order to cash and the ERP and all that.

And the other thing, just to add more color, is because we evolved the system ex U.S. into a cloud-based system, which is far better, we think, for the company, we're now merging the U.S. system into that newer system. So it's not a new thing, but it's a merger on the one system for the entire globe, so that should be helpful.

And then what else were you going to ask, Bill?

Bill Quirk -- Piper Jaffray -- Analyst

I was just going to ask just about Europe in particular. It's been somewhat mixed this quarter for a number of companies. And so I'm just curious as to what you're seeing there? Any concerns or impact from Brexit? And any additional color you could add would be quite helpful.

Doug Bryant -- President and Chief Executive Officer

No major macro issues, although we talked a little bit about the FX issues, but that has obviously an effect on all companies. But other than that, no macro issues. On a country by country basis, I think our team there has done a really nice job, they're pretty excited about the new products, vitamin D Lyme is now launched there, and I can talk a little bit more about the T2 product that -- the next-generation triage product, but we are now shipping product there as well. So I've got a pretty motivated commercial organization.

They're doing pretty well. I was just reviewing before the call here the -- our out of U.S. forecast, and they're suggesting that they've got upside in Europe and in Asia. So I would say, overall, really good, notwithstanding any -- some big macro surprise that we don't see quite yet.

Operator

Your next question comes from the line of Mark Massaro with Canaccord Genuity.

Mark Massaro -- Canaccord Genuity Inc. -- Analyst

I guess, Doug, maybe just to zero in on the cardiac business for a second. If you annualize mathematically just take $65 million, multiply it, times four, you get to $260 million. Your guide is for $276 million. The difference is $16 million.

So I guess my question is, do you expect the $16 million to come from the new products like troponin and tox? Or do you expect -- obviously, if you take $69 million times four, you get all the way to $276 million. So I guess I'm really just trying to ask you how much contribution do you expect from the new cardiac assays?

Doug Bryant -- President and Chief Executive Officer

Well, I'm expecting a reasonable chunk. But let me -- before I get into a specific number, let me say that I think I learned a long time ago and I have to say -- pick a single data point and extrapolate. If I were going to start from a single data point though, do I start at $68 million? $68 million is the number, notwithstanding the FX issue. I'm just saying that I think $65 million is a base line below, which we're not expecting to see.

$64 million to $69 million is the range, you could take $64 million if you wanted to and multiply it times four. You could take $69 million times four if you want it and given all that. And what we told you before was we didn't just pick a percentage and multiply it times a run rate. We said who are the customers, by country, where are we going to launch.

Toxicology is easier for us because we can name the customers that we expect to ship product to for the most part. So we're really comfortable that -- and what would you say, Randy, that number is about $5 million in toxicology that we're expecting. And then troponin is a wildcard. It could be smaller and -- but let's see what happens.

We're just not shipping product. High-sens troponin, is it important in Europe? Yes. So we'll see. We're not exactly making it available widely either.

We have somewhat of a limited launch. So overall, as we go through with the guys individually by customer and build the bottom ups, we still think that the $276 million in total on a constant-currency basis makes sense.

Mark Massaro -- Canaccord Genuity Inc. -- Analyst

OK. That's helpful. And then thanks for the comments on the Beckman litigation matter. I guess my question is it looks like there will be a decision within 90 days of appearing the oral arguments.

So that presumably would take us into the fall, call it, September, maybe October time frame, if I have that right. And I guess can I get a sense of your confidence that this could be resolved potentially ahead of going before a judge and a verdict would be reached in the court?

Doug Bryant -- President and Chief Executive Officer

Are you asking is there an opportunity to settle, is that what you're asking, Mark?

Mark Massaro -- Canaccord Genuity Inc. -- Analyst

Yes. It is, the probability of a settlement versus taking this all the way in court.

Doug Bryant -- President and Chief Executive Officer

Yes. So I'm going to give you an answer that's an answer, but it won't internally be satisfactory, I'm afraid, Mark. But settlement between the parties is always an option and clearly depends on the willingness of each party to compromise.

Mark Massaro -- Canaccord Genuity Inc. -- Analyst

Understood. My final question, if I can. Can you just speak to opportunities in alternate retail stores? And any types of new business development that you've seen that would give you maybe more satisfaction or less in this opportunity?

Doug Bryant -- President and Chief Executive Officer

Yes. Last count, I believe we were at around 4,700 urgent care centers as our customer. It's clearly an area of focus for us. It's a category that our product lineup, you would expect to do well and we do.

We compete very nicely in the segment. Lyme is not hurting us, of course, being the only company with the CLIA wave, Lyme assay that can be done on a finger-stick in 12 minutes, I think, in a nursing care setting doesn't hurt as much. And I think as you look forward, the next-generation Strep product will be helpful in that segment as well, the Strep 98. So you can imagine, we spent a lot of time looking at the category pretty closely.

So what else can I say, we like it, we're doing well in it and it continues to grow. I see deals every week that come across my desk. So it's good category, so is freestanding EDs, so is smaller hospitals. We like testing closer to where the patient lives.

Operator

Your next question comes from the line of Tycho Peterson with J.P. Morgan.

Unknown speaker

This is Julia on for Tycho. So first off, just a follow-up on BNP. I know you said you had expected so many BNP reorders which did not happen. Do you expect to recapture any of that in the second quarter?

Doug Bryant -- President and Chief Executive Officer

Yes.

Unknown speaker

The entire amount or --

Doug Bryant -- President and Chief Executive Officer

What I can tell you is, our commercial team can name the accounts, OK? So we have, month by month, who's ordering, when they're ordering. I don't see any gaps in terms of customers going away. I see customers who are ordering this month, next month, the following month, etc. So there's not huge market share shifts in the space.

What you're talking about is people who have very large labs with very large clinical chemistry systems and immunoassay analyzers. So when they order for those, when they feed those instruments, sometimes this is a quarterly order, sometimes it's a monthly order depending on the account. So it's a little lumpy. I suppose you could ask me why we don't have all these things on standing orders.

I don't know if that's done anymore, I'm kind of ancient. But nowadays, we tried standing orders as a way of smoothing things out. But our commercial team has got a very good handle on who's ordering and when they expect to order next. So whether that all happens -- offset completely in the second quarter, I can't really answer that.

Unknown speaker

OK. That's helpful. And then on rapid immunoassay, I mean it looks like excluding flu, the revenue also declined. I don't know if you called out Strep and RSV.

Is that just tied to the general flu seasonality? Or are there other sort of pricing or volume dynamics that you'd like to call out?

Doug Bryant -- President and Chief Executive Officer

No. That's entirely right. You got it right, Julia. So Strep is affected by the season and the magnitude of the season, so is RSV, not necessarily always as big as the variation with flu.

Nevertheless, you see big swings. And that's why when I try to ask the finance guys to tell me what the underlying growth rate is if I normalize for flu and those other products, I got a swing of about eight -- well, the underlying growth is about 8%, right?

Unknown speaker

OK. And then lastly, regarding -- I mean out of you maintaining your full-year outlook, just curious how much of Lyme contribution are you currently embedding in your guidance?

Doug Bryant -- President and Chief Executive Officer

Well, we've got a number in for Lyme. And actually, our own internal LBE, we recently took up. The benefit of Lyme, we're not seeing quite yet because it's not Lyme season, if you will, we do expect to see some sales in this quarter and we are. We do track our closes pretty closely, and I think we're on track to achieve what we had set out to.

The surprise in it, which is actually a little bit of an upside for us is that it appears, in the last report that I read, that 80% now of each of the new Lyme disease customers is coming with flu and Strep and the other products. So the sum total of those additional products is actually larger than the Lyme close. So I've got a lot of customers who have signed up for Lyme, but they don't really know how many tests they're going to do, right? So it's natural that we would say, "Well, don't worry about how many you're going to order there. Let's just order the whole thing, things that you can count, and we'll make that part of the -- I'll say it anyway, out of the bundle.

Operator

Your next question comes from the line of John Hsu with Raymond James.

John Hsu -- Raymond James -- Analyst

If we could just go back to FX for a second. Could you help us think about -- you obviously gave us the 1Q impact. But can you think of -- help us think about the 2Q impact and what you have baked in for the year, both on the top end and bottom line?

Randy Steward -- Chief Financial Officer

Well, we're anticipating and continued kind of -- with the Chinese yuan that there will be continued weakness in there. So baked in there, as Doug said, the $535 million is in a constant-currency basis off of the Q1 numbers. So it depends on where you think the Chinese yuan is going to be at the end of the year, correct? I mean, as I said, the $535 million we've given as far as guidance is constant currency based. So there is some risk or opportunity if it moves off of where we are at the end of Q1.

John Hsu -- Raymond James -- Analyst

Got it. And I guess just based on my numbers, it looks like -- and also similar to other companies reporting, obviously, the yuan is a big impact to you but also the euro. So can you just help me think about -- relative to the $2 million in the 1Q, at least in my model, I would expect to be a similar impact maybe slightly smaller in the 2Q, is that a fair way to frame it, how you're thinking about it at least for the 2Q?

Randy Steward -- Chief Financial Officer

Yes. I would say probably it's a little less in the Q2, probably in the $1 million to $2 million range.

John Hsu -- Raymond James -- Analyst

OK. Great. And then just as you walk through the year, can you just help us think about anything else to think about from a phasing perspective? You obviously gave some good color on cardiac. But for instance, impact of these start in the 2Q.

Is there any kind of a selling day impact there? Just help us think about any kind of phasing items as we move throughout the year?

Randy Steward -- Chief Financial Officer

Well, I think and certainly the back half of the year, you're going to see a benefit when we move distribution from a TSA arrangement with Abbott into our own distribution system, into our Summers Ridge facility. So we'll get a benefit there. We're continuing to see the synergy benefit. I think Doug indicated that we plan on exiting 2019 at a $15 million plus benefit with Summers Ridge and with the cardiac business, excluding the distribution capability.

So there's some opportunities there. Obviously, toxicology revenue at the back half of the year, we think, has some upside as well with the Lyme revenue.

John Hsu -- Raymond James -- Analyst

OK. Great. And then last one from me. I'm sure you guys are sick about talking about flu but nonetheless, I will ask the question.

Last year was obviously a very strong flu season. This season was the longest that we've seen in a decade. So how are you thinking about the flu tracking to your expectations in the 2Q?

Doug Bryant -- President and Chief Executive Officer

Well, we did have a little bit of a benefit admittedly so -- in Q2, not huge though, and so it's helpful. It's helpful in terms of the flu number.

Randy Steward -- Chief Financial Officer

Yes. I mean, historically, Q2 has been in the $5 million to $10 million range. So I think that's probably a good range. You did -- as I mentioned, inventory distribution is at a pretty low level, which obviously would be somewhat beneficial as we go through the rest of the year.

John Hsu -- Raymond James -- Analyst

Great. And last one for me. I apologize if I missed it. But can you give us an update on kind of where you stand for overall Sofia placements and then maybe how many systems are up on Virena now?

Doug Bryant -- President and Chief Executive Officer

Well, we said, as we always do at J.P. Morgan, that we were around the 35,000 number globally. And I don't have a recent Virena placement. I thought it was right around 11,000.

It may be higher than that now. Obviously, we're now into -- well, it has to be. But when we announced the 35,000, I think we -- John, we're at 11,000 at that time.

Operator

[Operator instructions] And your next question comes from the line of Alex Nowak with Craig-Hallum Capital.

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

Jumping between a few calls here, so apologies if this was already covered in the prepared remarks or the -- or in the Q&A. But I believe you said earlier you exceeded your internal estimates on flu. The data out there certainly suggest a more flat season than what you posted. So just curious now, did you see -- maybe going back to the data, did you see potentially some bigger stocking in Q4 than you originally thought? Or do you believe you saw any noticeable share losses due to new molecular entrants into the market.

Doug Bryant -- President and Chief Executive Officer

No. We -- OK. Let me help and then I have to ask you to clarify. But we built inventory in Q4 because we ran a program that was particular to larger urgent cares that might need product depending on the size of the -- well, depending on how many flu patients we were going to see.

So yes, so we built more in Q4 than we normally would just because we wanted to make sure that we did in that quarter. So that's the impact there. I'm not fully understanding what you mean by the magnitude of the flu season, and I presume you're talking about Q1.

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

Yes. I mean, if you look at some of the reports out that there's "a double wave" flu season where you saw an A and B strain actually take hold at two different time points. So I'm just curious why necessarily you didn't see the benefit from the B strain later in Q1.

Doug Bryant -- President and Chief Executive Officer

Well, we did. So I'm not sure how what news report you're listening to. But what we saw that was driving most of the volume was an H3N2 that was of a different clade than what's in the vaccine. And this particular H3N2 was particularly morbid.

In other words, it was causing people to get off the cache and go see the doctor. And so that was driving your patient volume. When you look Virena data, you also see the several states. The people that were feeling bad, a high percentage of them were due to influenza.

In other words, our positivity rates were quite high in several states. So the double wave, I saw the ILI data, it fell off for, what, a week or something and then kept going back, yes. So you have to be careful there, Alex, because the ILI as a percentage of office visits, it doesn't tell you how many office visits there actually were. So it's one data point, it's an interesting data point, but it doesn't really tell you anything.

I would be reluctant to call this last season a double wave. And the last time we saw two peaks, two real peaks was in 2009.

Randy Steward -- Chief Financial Officer

I don't think our Virena data show that.

Doug Bryant -- President and Chief Executive Officer

No. Our Virena data absolutely didn't show two peaks. So --

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

OK. Interesting. That's helpful. Thanks for clarifying that.

And you continue to pay debt off here and leverage ratio continues to come down. So just any updates around M&A? Where does it make sense to bring some assets in?

Doug Bryant -- President and Chief Executive Officer

Well, it's just simply around fit, so we've built infrastructure globally, customer service centers there and we're working on one here as well. And so things that fit our infrastructure also fit -- things that fit with our commercial people do, where they go and who they see, those make a lot of sense. And so there are a number of things that we're looking at. But obviously, I can't tell you a whole lot more than that at this stage.

But we're looking. We obviously paid down a lot of debt. We have borrowing capacity and we have cash. So if we can find something that's really fit, then we'll do it.

But we're going to be just like we were before, we're going to be pretty judicious on our approach to it.

Operator

Your next question comes from the line of Brian Weinstein with William Blair.

Brian Weinstein -- William Blair -- Analyst

Just like the last guy, I was running around multiple calls, so this may have been answered, but I don't think in explicit detail maybe. So on the triage business, can you just go back and just go through again why that business was down 10%? And then the second question is, on the loss revenues that somebody else had talked about in the -- and the lack of ordering from those 70 customers, did you quantify the impact of that? And we're already kind of in the first week of May, so I think you tried to address it before, but any sign that that would be coming back in the second quarter now that we're almost halfway through it?

Doug Bryant -- President and Chief Executive Officer

Well, I'll answer them in reverse order and kind of repeat what I said before, and that is that our commercial team can name the customers and they track it monthly. There's very little share shift going on in that space. When it does happen, we know about it, right? So we're able to tell you if we lost a customer or not. So there is a timing element, some customers are quarterly, some are monthly, some are more frequently than that.

So is it soft in the U.S.? Yes. Some of it is still into BNP, some of it is due to obviously the triage as well. And as I pointed out, some of it is frankly due to timing. Now on the first part of the question, the 10%, I don't get where you're coming from there.

When you look at Q1 2018, and so if you're looking Q1 to Q1, Q1 2018 had a nominal $68 million. But as we've said before, we had some ins and outs there and that really was more like $66.5 million, right? Here, constant currency, we actually did $68 million. So even though we did have some softness in the U.S., it was offset by China and Europe. So $68 million is the number.

We did have FX obviously this time that we didn't have before when Abbott had we moved those products to the TSA. So it's not actually, on a nominal basis, not declining at all. And even if you throw FX in there, it's not significantly different. So it's not really a decline versus Q1 2018.

Operator

And that is all the time we have today. Please proceed with your presentation or any closing remarks.

Doug Bryant -- President and Chief Executive Officer

Well, great. Thanks, everyone, for your support and of course, for your interest in Quidel. A little bit of a disconnect in terms of the forecasting, but from our perspective, spot on our annual operating plan. And I don't think we've ever internally forecasted this closely as -- and, as well as we did.

I believe we're well-positioned to achieve the growth objectives that we did give now, a target for year end and hopefully, that is helpful for everybody as they model. Thank you, everybody.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Ruben Argueta -- Director of Investor Relations

Doug Bryant -- President and Chief Executive Officer

Randy Steward -- Chief Financial Officer

Jack Meehan -- Barclays -- Analyst

Bill Quirk -- Piper Jaffray -- Analyst

Mark Massaro -- Canaccord Genuity Inc. -- Analyst

Unknown speaker

John Hsu -- Raymond James -- Analyst

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

Brian Weinstein -- William Blair -- Analyst

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